Why Barnes & Noble Should Survive: We Need It

Barnes & Noble is in an ignoble position. The nation’s last remaining major book chain seems headed for the bone yard. At least, that’s how B&N’s financial results look. But maybe, just maybe, the company can pull it out. No, it won’t be tomorrow’s hot growth stock, yet it could return to health. And that’s a good thing for a society that rests upon the knowledge and artistry that books impart.

Let’s start out with the bad news. For the fiscal year ending in January, Barnes & Noble’s same-store sales declined 5.8%. This marked the fourth consecutive year of sales declines. The crucial holiday season also showed sales slides, of 6.4% for stores and 4.5% online. The stock has plummeted 80% from its 2005 peak.

Time was that Barnes & Noble was the apparently unstoppable goliath of the publishing world.

Remember the 1998 movie “You’ve Got Mail,” with Tom Hanks and Meg Ryan? He was the head of a Barnes & Noble-like goliath and she owned a sweet little children’s bookshop that the monster was driving out of business. Back then, big-box booksellers like B&N were blamed for the decline of independent booksellers.

Well, today that dynamic is as outdated as an AOL dial-up connection. Amazon is the monster, out to kill both Barnes & Noble and any other physical emporium of books. Independents shuttered by the droves, and No. 2 book chain Borders went out of business. When Borders closed in 2011, B&N picked up just 30% to 40% of its sales. As Barnes & Noble chief Len Riggio said of that time: “The rest went poof.” In addition to selling books at a discounts and via the Web, Amazon also went strong into ebooks.

But two interesting developments may portend a better future for Barnes & Noble. First, printed books have revived, with sales climbing 1.8% in 2017 to 687 million units. That marks the fifth consecutive year of increase after a long slide beginning earlier in this century. (To be sure, Amazon has a big chunk of that expanding bounty.) Meanwhile, the once-feared demise of physical books at the hands of ebooks has not happened. In fact, ebook sales have stalled out for traditional publishers, dropping 10% in 2017.

The second significant development: Independent bookstores have revived. From 2009 through 2015, they rose 35% to 2,227. While Barnes & Noble and the independents once were mortal enemies, they now are foxhole friends. At the Book Expo publishing conclave earlier this month, Riggio proclaimed that the more independent bookstores there were, the better. Increased stores equal increased readership. He noted that B&N and the independents were no longer “in mortal competition.”

Why have printed books made a comeback? “Readers began to yearn again for the joys of reading physical books,” Riggio told the Book Expo crowd.

And therein lies the path to the chain’s possible salvation. The industry’s good news hasn’t yet spread to Barnes & Noble, but some encouraging signs do exist.

Like its desire to improve its stores. B&N plans to clear away much of the shelf clutter that isn’t related to books, namely games and gifts. It also is experimenting with running actual restaurants in their stores, a step up from their customary Starbucks counters. The company also should abandon its money-losing Nook reading device, and use the money to upgrade its stores. Amazon’s Kindle owns that ebook reading space.

As the last surviving large book chain, with 630 outlets, Barnes & Noble is too important to fail. A bankruptcy filing, if that occurred, would galvanize powerful economic forces to save it. Think how Amazon chief Jeff Bezos, of all people, bought and revivified the Washington Post.

“It would be a disaster for the US book industry if that company went away,” said Oren Teicher, CEO of the American Booksellers Association, which represents independent stores.

All things being equal, those factors alone should keep it afloat. And maybe the stock could finally head upward.

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